Building an Ethical Culture (Part 1)

By Linda Fisher Thornton

This is an update of a previously published series that became a reader favorite.

After I published “Prevention or Cure: Your Choice” about reducing ethical risk and creating a positive culture a reader asked for more information about the business case for prevention. Here are some compelling reasons why the prevention approach is a better business decision than waiting for ethical problems and applying a “cure” after the organization is already in trouble.

Why Build An Ethical Culture?

Building a preventive, ethical culture where people can do great work pays off financially in stock market returns. (SHRM)
In an ethical culture there are fewer incidences of every kind of misconduct. (Ethics Resource Center)
When leaders commit to ethics and lead accordingly, there is improved satisfaction with leadership, better perceived leader effectiveness, and improved employee
dedication. (OECD)
In a strong positive culture there is increased reporting of financial misconduct and less retaliation. (Ethics Resource Center)
An ethical culture serves to “strengthen a firm’s reputation and the life of its brand, sustain the business into the future, and should prove to be the best defense against material misconduct and heightened regulatory interest“. (KPMG)
In an ethical culture there is less stealing, fewer conflicts of interest and less abusive behavior. (Ethics Resource Center)
“Companies that use prosocial incentives are likely to produce happier, more satisfied, and more loyal employees. An ethical culture not only does good; it also feels good.” (Nicholas Eply, HBR)
In an ethical culture, there are fewer health and safety violations, fewer employee privacy breaches, fewer bribes, and less discriminatory hiring. (Ethics Resource Center)
Ethical cultures experience less resource abuse, substance abuse, internet abuse, and sexual harassment. (Ethics Resource Center)
Customers buy more from ethical organizations (Chuck Gallagher)

The 25 business reasons cited in this ten-point list represent just a sampling of the positive benefits and improved metrics organizations with positive cultures experience.

“Organizations should aim to design a system that makes being good as easy as possible.
”Nicholas Epley, the John Templeton Keller Professor of Behavioral Science at the University of Chicago Booth School of Business, in his HBR article How to Design an Ethical Organization.

There is a strong, compelling business case for creating a positive culture that prevents ethical problems. Watch for additional posts in this series, and feel free to post additional supporting research on ethical prevention in the comments!